Everyone’s heard rumors and stories about the dos and don’ts of buying a home. But you shouldn’t let these mortgage myths intimidate you.
#1: You Can’t Afford to Buy a Home
Truth: If you can pay monthly rent, you’re probably able to afford a monthly mortgage payment. Find out how much mortgage you can afford by talking to a qualified mortgage lender. You can even get a quick, non-binding estimate, just to get an idea of how much you could potentially borrow.
#2: You Need to Put 20% Down to Buy a Home
Truth: A 20% down payment is favourable but many people don’t have that much money to put down. There are also many programs available for borrowers who can’t afford a huge down payment.
If you have to put down less than 20%, you may have to pay for private mortgage insurance which is added to your monthly mortgage payment.
#3: Excellent Credit Is a Must to Be Approved for A Mortgage
Truth: While credit history is one of the factors determining whether a borrower is approved for a loan, your credit score doesn’t have to be flawless to find a mortgage that fits your budget.
There are also a number of mortgage programs for borrowers with lower credit scores.
#4: Renting Is Cheaper
Truth: Think you can’t afford a home? What about all that money that you’re spending on rent? When paying your mortgage, the money spent is going back into the equity of your home, which means that you’re getting a real return on your investment every year.
A fixed-rate mortgage makes your monthly principal and interest payments the same for the life of your loan. Rent prices have the potential to rise every year so it may be cheaper to get a mortgage in the long run.
#5: The Best Option Is the Lowest Interest Rate
Truth: When shopping for a home loan, low-interest rates are important, but aren’t the only thing to consider.
Your Interest Rate: This is what it will cost you to borrow money and is the percentage you’ll be charged for borrowing the money.
Your Annual Percentage Rate: This gives you a comprehensive look at what you’ll pay when you borrow money for a loan. It’s basically the total cost of borrowing money expressed in terms of a rate.